Uber’s U-turn: How the new CEO is cleaning house after scandals and lawsuits

Dara Khosrowshahi knew he was going to have to clean up a spectacular mess when he became CEO of Uber last August.

In the previous six months, the ride-hailing service — one of the world’s most valuable startups — had careened out of control, providing fodder for headline after headline. It lost more than 200,000 angry passengers to a #DeleteUber movement. It was outed by former Uber engineer Susan Fowler, who wrote a bombshell blog detailing a chaotic corporate culture that okayed sexual harassment. Lawsuits poured in, the chief executive was forced to step aside and the company was left leaderless for two months with a dysfunctional board of directors.

“It looked messy,” Khosrowshahi, 48, said at a Goldman Sachs technology conference in February. “And it was messy.”

Khosrowshahi, recruited from travel site Expedia, started his turnaround at Uber by talking to people. In his first two weeks, he met with drivers, women engineers and even staff who worked the customer support lines.

Khosrowshahi’s leadership style stands in
stark contrast to that of his predecessor, Travis Kalanick. Uber’s
co-founder used a “burn the village” approach (as he called it) that
built the startup into the behemoth it is today — an international
ride-hailing service in 73 countries with 18,000 employees that’s valued
by investors at $72 billion.

But, as at many companies, Uber’s culture reflected the personality of the person at the top: overly aggressive and willing to do anything to win.

“Travis had almost a Rambo-style approach to leadership, which made Uber giant,” said Eric Schiffer, a brand management expert and CEO of Reputation Management Consultants. “But with it came a lot of fallout.”

Kalanick didn’t respond to a request for comment.

Through the first half of 2017, unsurprisingly, Uber employees exited the company in droves. Some quit because they didn’t want to be associated with the embarrassing scandals. Others left because they felt mistreated by managers. More than 20 were fired for unethical behavior after two internal investigations, one of which was led by former US Attorney General Eric Holder.

“A lot of us probably thought about leaving at some point,” says Wayne Ting, who’s worked at Uber for four years and is now Khosrowshahi’s chief of staff. “For all of us who stayed, we stayed because we believe Uber can be a better company and we wanted to stay and fight for a better Uber.”

The question now: Can a nice guy build a better Uber?

Shaped by loss

When Khosrowshahi was named Uber’s CEO, he was virtually unknown. He’d been the CEO of Expedia for the previous 12 years and had a career in investment banking, but outside of those circles, few knew of him.

“I’d never heard of Dara before,” Ting says. “We were all so hopeful for what he could bring, but there were definitely a lot of unknowns.”

Khosrowshahi was born in Iran in 1969. His family fled just before the country’s revolution nine years later and eventually settled in Tarrytown, New York. When Khosrowshahi was 13, his father returned to Iran to take care of his father and was detained by the government for six years, according to Wired. Khosrowshahi’s mother raised him and his two brothers on her own during that time. He became a US citizen in 1996.

“The experience of my family losing everything when they came to the US really shaped me,” Khosrowshahi said during his first all-hands meeting at Uber on August 31. “I saw my family losing everything and you know what, we rebuilt a life. That has allowed me to be comfortable with taking risks and taking decisions without worrying about things too much.”

Khosrowshahi earned an engineering degree from Brown University in 1991, and then worked as an analyst at the investment bank Allen & Company before joining Barry Diller’s USA Networks where he eventually became president. He later became chief financial officer at Diller’s IAC, the former parent company of Expedia. When Expedia spun off from IAC in 2005, Diller named Khosrowshahi as CEO.

Khosrowshahi took Expedia from a midsize business to a family of brands. He oversaw the acquisitions of travel sites Orbitz, Travelocity and HomeAway, and quadrupled the company’s revenue from $2.1 billion in 2005 to $8.7 billion in 2016. His “fair” management style earned him a 94 percent approval rating on jobs site Glassdoor.

At Uber, Khosrowshahi’s Glassdoor rating has climbed to 96 percent.

“He’s an exceptional leader — a rare combination of keen financial acumen, an eye for great product and incredible people leadership skills,” says Expedia CEO Mark Okerstrom, who served as CFO under Khosrowshahi. “Uber is fortunate to have him at the helm.”

Khosrowshahi is more vocal than most tech CEOs on social issues, often citing his immigrant roots. He criticized President Donald Trump’s travel ban restricting immigration from several majority Muslim countries. He spoke out in favor of marriage equality. And he’s weighed in on keeping Deferred Action for Childhood Arrivals (DACA) in the US. He frequently wears a black T-shirt with white lettering that reads, “We are all dreamers.”

Uber’s staff says Khosrowshahi incorporates that same empathy into his leadership style.

“He doesn’t come across as having everything figured out,” Bryndza says, adding that one of the things Khosrowshahi hammers on the most is building trust. “That consistent drum beat… those things about transparency, about fairness, about objectivity.”

No excuses

From the start, Khosrowshahi wanted to hear what people at Uber had to say.

In his first two weeks, he held a roundtable discussion with drivers to hear their complaints (they want a higher cut of earnings) and shadowed Uber’s customer support representatives to listen to what passengers were saying. He also met the company’s staff-run clubs that support people from different backgrounds. They include “UberHue,” which promotes black diversity, “Women of Uber,” “Los Ubers” for Latino diversity and “UberPride” for LGBTQ inclusion.

“Imagine taking over this company and all of the issues you have to deal with — Softbank, lawsuits, this that and the other, and this was his priority,” Bryndza says. “To me this is the perfect example of where his head was and how he wanted to lead a different way. And then, little by little, you saw that over and over and over again.”

And insiders and outsiders say that Khosrowshahi has shown just how different his leadership style is from Kalanick’s no-apologies-necessary mantra. He hired the company’s first chief diversity and inclusion officer, Bo Young Lee, and its first chief operating officer, Barney Harford, who’s the former CEO of Orbitz. (Kalanick famously dragged his feet on hiring a COO, because he reportedly didn’t want to share duties in running the company.)

“He has approached things conservatively,” said Schiffer, the brand management expert. “They’ve been in damage control mode in a professional way… That will get you out of what was an epic-scale mess.”

Khosrowshahi made nice with London lawmakers after the city revoked Uber’s license to operate. And he held meetings that Kalanick never did during regulatory battles with cities around the world.

“While Uber has revolutionized the way people move in cities around the world, it’s equally true that we’ve got things wrong along the way,” Khosrowshahi wrote in a letter to London in September. “On behalf of everyone at Uber globally, I apologize for the mistakes we’ve made.”

And unlike Kalanick, Khosrowshahi disclosed that hackers had grabbed data from 57 million drivers and riders in October 2016, and that Uber paid the hackers $100,000 to delete the information. Khosrowshahi learned of the hack soon after he came on and told the public in November.

“You may be asking why we are just talking about this now, a year later. I had the same question, so I immediately asked for a thorough investigation of what happened,” Khosrowshahi said at the time.

“None of this should have happened, and I will not make excuses for it,” he added. “While I can’t erase the past, I can commit on behalf of every Uber employee that we will learn from our mistakes.”

No distractions

Along with his apology tour, Khosrowshahi has aimed to eliminate distractions for the company.

Under Kalanick, Uber’s board was a battleground, with some directors fighting to oust the former CEO while others tried to protect him. Khosrowshahi worked to reform the board and he reshaped Uber’s shareholder structure, so that early investors and Kalanick (who is still on the board) were stripped of their supervoting rights and limited to a one vote per share system.

Khosrowshahi also pushed to settle the lawsuit with Waymo, the self-driving car unit owned by Google’s parent company Alphabet. In one of the highest-profile legal battles in Silicon Valley history, Waymo sued Uber in February 2017 for allegedly stealing its driverless car trade secrets. The case went to trial in February of this year and was set to last a month.

Witnesses and court documents revealed juicy company details, like Kalanick’s secretive text conversations that said things like “second place is first loser.” After four days, Uber and Waymo settled. Khosrowshahi was crucial to those talks, Ting says, and sought to treat Waymo more like a friend than a foe.

“One
of the hard things in 2017 was that there was so much distraction and
so much dysfunction,” Ting says. “Dara was able to start removing some
of that distraction. Whether it’s Waymo, whether it’s more governance,
he allowed the company to then go back to business.”

Because of
that, Uber has become a more stable work environment, says Bryndza, with
better employee retention and morale. She says it’s also helped that
Khosrowshahi has instituted new cultural norms for the company.

Under Kalanick, Uber had a list of 14 “cultural values” that it displayed on conference room screens around its modern San Francisco headquarters. Employees were expected to personify these values, which called for things like toe-stepping, principled confrontation and “always be hustlin’.”

Khosrowshahi rewrote those values as eight “cultural norms.” But first, he asked every Uber employee for ideas. People sent in more than 1,200 submissions, which were then voted on 22,000 times.

“One of the first things we did when I started was to crowdsource what Uber employees thought our new cultural norms should be,” Khosrowshahi wrote in an email after I asked him for comment. “These norms came from the bottom up, so employees can feel invested and committed to them, rather than having to follow strict directives from the top.”

The final eight norms include credos like “we celebrate differences” and “we value ideas over hierarchy.” They also include one that’s come to typify Khosrowshahi’s leadership: “We do the right thing. Period.”

Is it enough?

While Uber is different from what it was a year ago, it’s still faces obstacles.

“They are still the shadow of some of the unfortunate events of the past few years that continue to hang over the company,” says Henry Harteveldt, a travel industry analyst for Atmosphere Research Group.

That includes blowback from “some of Mr. Kalanick’s behavior that continues to plague the company,” Harteveldt says, including tension with regulators, drivers and passengers around the world.

New problems also keep cropping up. In March, one of Uber’s self-driving vehicles killed a pedestrian in Arizona. It was the first known fatality caused by a vehicle in full autonomous mode.

After the crash, industry insiders questioned Uber’s safety standards and its rush to get autonomous vehicles onto public streets. There have been several news stories alleging that Uber’s technology lags behind competitors’. The company has grounded all of its driverless cars — at least for now.

And Khosrowshahi hasn’t been perfect. When a Massachusetts Institute of Technology research group reported that an analysis of Uber and Lyft drivers’ earnings showed they make on average $3.37 per hour, the chief executive took to Twitter saying MIT stood for “Mathematically Incompetent Theories (at least as it pertains to ride-sharing).”

While MIT said it would rerun its analysis, some criticized Khosrowshahi for a tone-deaf tweet.

Uber’s ability to make money is also an issue. Khosrowshahi has said he hopes for an initial public offering in 2019, but the company lost $4.5 billion in 2017 and has yet to turn a profit. Uber counters that it’s still growing and its revenue is rising.

“If they are eyeing an IPO, they’re going to have to show not only a path to profitability but to sustained profitability,” says Harteveldt.

He
thinks Khosrowshahi is up to the challenge. “If you take a look at
Dara’s background, he came out of the financial world. A lot of the
things Dara is best known for are the deals that he oversaw,” Harteveldt
says, mentioning his acquisitions of other travel sites when he was
Expedia’s CEO.

With Khosrowshahi, “Uber is less of ready, fire, aim than they have been.”

So even as Kalanick’s misdeeds keep casting a shadow over the
company, Khosrowshahi is still doing what he did when he walked in the
door — focusing on cleaning up Uber’s mess.

“You should never
stop working to improve your culture, but I’m really happy to see how
our new norms have slowly but surely spread positive change across the
company,” Khosrowshahi said in his email to me. “For culture change to
take hold at a big company, it can’t come from the top down.”